‘Automation favors capital’ – WEF to take on the Fourth Industrial Revolution
The World Economic Forum pushed back its annual meeting from January in its perennial home of Davos, Switzerland, to May in Singapore, but the group is still convening political, business and government leaders next week in a virtual format for The Davos Agenda. Discussion of the Fourth Industrial Revolution will be a central topic, as it has been in previous sessions, but recast this time in the context of lessons learned and vulnerabilities exposed by the ongoing global COVID-19 pandemic.
The idea of using technology to drive digital transformation of manufacturing at scale–the Fourth Industrial Revolution–is a major part of strategic roadmaps across the technology sector, including among the telecoms set, both operators and vendors, who are keen to see 5G used as the connectivity medium for smart, reconfigurable, and increasingly automated manufacturing.
How manufacturers should think about the future of their businesses, workforce implications, and the role of technology are well-covered in the pre-conference materials published by the World Economic Forum membership. What’s not addressed in much detail, however, is how the combined forces of globalization and automation can increase productivity and output quality while simultaneously contributing to decreases in income and employment.
Daron Acemoglu and James A. Robinson wrote in their 2019 book, The Narrow Corridor: States, Societies, and the Fate of Liberty, that, “By its nature, automation favors capital, which is now used more extensively in the form of new machines. It also tends to favor skilled workers relative to the less skilled, whose tasks are being taken over by machines. Not surprisingly, therefore, new automation technologies have had sweeping distributional consequences.”
This idea of a shift in manufacturing skills necessary to be successful as the Fourth Industrial Revolution takes shape is important. WEF’s The Future of Jobs Report 2020 projects that half of the global workforce will require “reskilling” by 2025.
Tata Consultancy Services’ Global Head of Corporate Social Responsibility Balaji Ganapathy called for a “renaissance on skills” in a piece published on Jan. 20. He noted “there’s a short window” to complete this massive effort, “and it’s closing fast.” Primary stakeholders need to take a “lifecycle approach” built on the premise that “learning agility is necessary for people to remain resilient to shifting market trends. It requires a commitment to lifelong learning from all parties … skills are the new currency and purposeful action can empower people to create a sustainable future for all.”
McKinsey & Company Senior Partner Katy George reckons that manufacturing interests need to focus on workforce engagement as well as “stronger resilience, faster innovation, [and] higher customer satisfaction…And it all needs to happen at once.” Accomplishing this will be a function of organizational digital transformation built on “scalable technology that supports the business goals.”
But, George notes, the scalability bit has proved a sticking point. She points to McKinsey & Company research that finds 74% of companies “reported getting stuck in pilot mode” last year, up from 56% in 2019.
In an article written ahead of The Davos Agenda, George said that companies successful in scaling up digital transformation initiatives share some common best practices: Shifting “from an atomistic to a holistic approach;” keeping “the workforce at the core of the digital transformation;” and defining “objectives for bottom-line impact and eco-efficiency.”
“The Fourth Industrial Revolution is no longer hype: it’s fully here, enabling real gains in productivity, sustainability, agility and speed-to-market,” she wrote. “Manufacturers that choose to reimagine their growth strategies by embracing the advances are setting new benchmarks. Those that do not risk falling behind in an uncertain and increasingly threatening competitive landscape.”
In a recent report and companion webinar prepared by Enterprise IoT Insights in conjunction with Rockwell Automation, we explored the point visited by George that digital transformation investments must be directly tied to desired business outcomes in order to meaningfully scale. An important piece of this is a granular view of Overall Equipment Effectiveness (OEE), a fundamental manufacturing metric pioneered by Seiichi Nakajima and further developed by the Japan Institute for Plant Maintenance.
OEE is a percentage score calculated by measuring availability (productive time), performance (cycle time), and quality (waste/scrap). By multiplying the percentage of availability, performance and quality, you can derive an OEE score. Drilling down further, we categorize the six big losses beneath the three OEE inputs. Availability covers equipment failures and breakdowns, as well as time spent on setup and adjustment, performance encapsulates idle time and reduced operational speed, and quality ecompasses process defects and reduced yield.
Rockwell Automation Solution Architect Terry Gansen explained in an interview with Enterprise IoT Insights how to approach scaling up an OEE regimen that flows from currently available technologies and informs future digital transformation investments. “You have the top-level enterprise, below that multiple sites, below that areas, and within areas you have lines, and within lines there are work cells. Having that structure, you can work on one particular machine … then start to roll that up in terms of that machine across its line, then compare different lines at one facility.” And then a virtuous cycle kicks in.
“Having that organizational structure in place automatically starts to align the data and the information,” Gansen said. “If you come up with three to five basic data points, you can start to use that same foundation and expand it across multiple machines and lines and work cells and continue to scale up.” This scale enables more deep analysis and optimization, allowing a manufacturer to start breaking down production by part, by operator or both. You can even drill further down to look at shifts and individual employees to gain insight into particular sets of knowledge or training and then automate that to make it consistent and scalable.
Ericsson CEO Börje Ekholm, in a recent blog post, touted the role of 5G in “address[ing] economic and environmental challenges, while mitigating inequality.” Applied to a manufacturing environment, he said 5G can automate “heating, ventilation, air conditioning, light control and building management.” Ericsson itself has brought the idea of the Fourth Industrial Revolution to bear on its own operations, building a 5G-enabled, fully automated factory in Texas that produces 5G radio equipment. This investment, Ekholm said, “sets a precedent for how smart manufacturing can optimize processes for efficiency and increase production through automation.”
As to how 5G can help address inequality, Ekholm points out the direct line between digitization and reduced carbon emissions, increasing agricultural output, and supporting the creation of millions of new jobs. But, he wrote, “With rewards … come risks.” Ericsson research suggests that by the end of 2026, of the 3.5 billion global 5G subscriptions, 80% will be in North America and only 5% in sub-Saharan Africa. “Given that, by 2030, we forecast that two-thirds of the world’s workforces will depend on 5G connectivity, it is critical that we work towards closing the digital skills divide and promote an agenda which ensures digital inclusion.”
Back again to the centrality of enhancing workforce skills to ensure the Fourth Industrial Revolution doesn’t further concentrate wealth in a handful of nations among a comparatively small group of workers. If we look back in time, “Technological progress increases productivity and expands the range of products available to consumers, and has historically been at the root of sustained economic growth,” Acemoglu and Robinson wrote. “At times, it has also been the tide that has lifted all (or most) boats. … But the bewildering array of new technologies that have transformed workplaces over the past 30 years appears to have had quite different effects.” Hopefully the conversations next week during The Davos Agenda, discussions in boardrooms of major global firms, and lessons in classrooms around the world, help make the next three decades markedly different from the last three decades by focusing on a digital-ready workforce that will be included in rather than displaced by the Fourth Industrial Revolution.